Today’s KeysWhat are Internal Controls What are High Risk AreasHow to Assemble a TeamHow to Document Where to Find Resources

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What are Internal Controls

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Polling QuestionWhat Comes to Mind When You Hear “Internal Controls”?

1. Safeguard Assets2. Compliance with Policies/Laws3. Reliable Financials4. Effective & Efficient Operations

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Objectives of Internal Control are Interrelated

FinancialReporting Compliance

OperationsSafeguard

Assets

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Principles of Internal Control

●Process●Achieved by people●Gives reasonable assurance●Benefits the organization●Tailored to the environment●Must be cost-effective

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Control Environment

●Management & Board set tone●Influences control effectiveness ●Provides discipline & structure●Includes technical competence ●Maintain ethical commitment

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High Risk Areas

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Polling QuestionWhat is your organization’s biggest risk?

1. We trust people too much2. Potential for collusion3. Weak segregation of duties4. Lack of safeguards

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Areas where fraud is most likely

● Cash & valuable items● Payroll fraud● Vendor fraud ● Banking transactions

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FRAUD TRIANGLE

RATIONALIZATION: Justification of Dishonest

Actions

PRESSURE:Motivation to Commit Fraud

OPPORTUNITY: Ability to Carry Out

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Red Flags of Potential Fraud

●Employee living beyond means●Unwilling to take vacation or

delegate●Financials prepared late●Unexplainable variances●Controlled relationships

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Assemble a Team

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Polling QuestionDo you have an active Audit or Finance Committee?

1. Yes2. No3. Planning to implement

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Audit/Finance Committee

●Oversee system of internal control

●Oversee annual auditMeet with auditor twice/year pre-audit & post audit with opportunity to meet without staff present

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Board of Directors

●Provide guidance & oversight with mission at top of mind

●Set the tone of the organization

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Board of Directors

●Ensure an engaged finance/audit committee is in place

●Knowledgeable about activitiesbe objective & inquisitive

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Board of Directors

●Governance Best Practices•Review Form 990•Conflict of Interest Policy•Whistleblower Policy•Document Retention &

Destruction Policy•Gift Acceptance Policy

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Management

●Set the tone of the organization

●Identify & address risks

●Hold employees accountable for their actions

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Document Policies & Procedures

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Polling QuestionDoes your organization have policies/procedures documented in writing?1. Yes2. No3. Somewhat4. We are going to start

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Accomplish Good Controls

●Design with everyone in mind ie: employees, board, etc.

• Segregate Duties●Train people about expectations●Use software where possible●Make process a bit inconvenient●Watch for signs

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Assess What Can Go Wrong

●Identify potential fraud risks•High Risks•Low Risks•Likelihood•Impact

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Resources

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Polling QuestionWhat area does your organization need the most help strengthening?

1. Cash Receipts2. Cash Disbursements3. Payroll4. Financial Close5. Information Technology

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●Future Learning Circles

●Resources in Packet•Today’s Slides•Internal Controls Checklist•Community Foundation

Internal Control Charts•Resource Listing

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Questions & Answers

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